10.

98 a
2.98 FINANCIAL REPORTING
v
v
UNIT 3
INDIAN ACCOUNTING STANDARD 108 : OPERATING
SEGMENTS

LEARNING OUTCOMES

After studying this unit, you will be able to:

 Explain the meaning of ‘operating segments’
 Define the ‘chief operating decision maker’ (CODM)
 Identify the reportable segments and the application of aggregation
criteria
 Comply with the disclosure requirement under Ind AS 108 with regard to
operating segments
 Differentiate between Ind AS 108 and AS 17

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.99

UNIT OVERVIEW

Ind AS 108

Identification of Operating Segments CODM

Discrete information
Determination of Reportable Operating
Segments Expected to earn revenue

Aggregation criteria

Quantitative thresholds

Disclosure Measurement Entity-wide disclosure

General Information
Reconciliations Information about
products and services

Information about
profit or loss, assets Restatement Information about
and liabilities of previously geographical areas
reported
information
Information about
major customers

© The Institute of Chartered Accountants of India

 10.100 2. a
FINANCIAL REPORTING
100 v
v

3.1 CORE PRINCIPLE

An entity should disclose information to enable users of its financial statements to evaluate the
nature and financial effects of the business activities in which it engages and the economic
environments in which it operates.
Ind AS 108 requires an entity to disclose information to enable the stakeholders to have insight
into the entity’s operations from the same perspective as that of its management. For instance,
in case of an entity engaged in multiple lines of business / business activities (e.g., engineering,
financial services and IT), the users of financial statements must have the information about the
performance of each of its ‘business activities’ as perceived by management in order to make
better and more informed decisions about their investments in the entity as a whole.
Similarly, an entity may be operating across multiple economic environments. ‘Economic
Environments’ in general, are those factors which have an impact on the working of any
business. These factors could include political and economic macro-systems, trade cycles,
economic resources, statutory environment, income levels, industrial growth rates and many
other such factors. These are dynamic in nature and are in a continuous state of change.
In view of these complexities, Ind AS 108 requires disclosure of information in a manner which
enables users to make informed decisions based on their assessment of the economic
environments in which the different businesses of an entity operate.

3.2 SCOPE
Ind AS 108 should apply to companies to which Indian Accounting Standards notified under the
Companies Act, 2013 apply.
If an entity that is not required to apply Ind AS 108 but chooses to disclose information about
segments that does not comply with Ind AS 108, it should not describe the information as
segment information.
If a financial report contains both the consolidated financial statements of a parent that is within
the scope of Ind AS 108 as well as the parent’s separate financial statements, segment
information is required only in the consolidated financial statements.
Extract from: Hindustan Unilever Limited’s Annual Report for 2021-2022

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.101

3.3 OPERATING SEGMENTS

An operating segment is a component of an entity:
(a) that engages in business activities from which it may earn revenues and incur expenses
(including revenues and expenses relating to transactions with other components of the
same entity);
(b) whose operating results are regularly reviewed by the entity’s chief operating decision
maker (CODM) to make decisions about resources to be allocated to the segment and
assess its performance; and
(c) for which discrete financial information is available.
An operating segment may engage in business activities for which it has yet to earn revenues,
for example, start-up operations may be operating segments before earning revenues.
A perusal of the above requirements for identifying an operating segment differs with
requirements contained in Accounting Standard (AS) 17, Segment Reporting. According to
AS 17, identification of business segment is determined by considering risk and returns derived
from an identical product or service or group of related products and services. Similarly,
identification of geographical segment is determined by considering the risk and returns from
products and services within a particular economic environment.
Ind AS 108, however, requires the consideration of earning of revenues and incurring of
expenses from a business activity, the operating results of which are regularly reviewed by
entity’s CODM and discrete financial information is available. It may be noted that AS 17 follows
the approach of risk and return for determination of a business and geographical segment.
Ind AS 108, however, follows the management approach meaning thereby that whichever
business activity is considered by the management as a separate source of revenue will be
considered as an operating segment, the operating results of which are regularly reviewed by
CODM to make decision about resources allocation and performance measurement.
Under this approach, not only would enterprises be likely to report more detailed information but
the knowledge obtained of the structure of an enterprise’s internal organisation is valuable in
itself because it highlights segments based on such structure. This approach results in the
following significant advantages:
 An ability to see an enterprise “through the eyes of management” enhances a user’s ability
to predict actions or reactions of management that can significantly affect the enterprise’s
prospects for future cash flows.
 Information about those segments is generated for management’s use and hence the
incremental cost of providing information for external reporting would be relatively low.

© The Institute of Chartered Accountants of India

 10.102 2. a
FINANCIAL REPORTING
102 v
v
Illustration 1
ABC Ltd. manufactures and sells healthcare products, and food and grocery products. Three
products namely A, B & C are manufactured. Product A is classified as healthcare product and
product B & C are classified as food and grocery products. Products B & C are similar products.
Discrete financial information is available for each manufacturing locations and for the selling
activity of each product. There are two-line managers responsible for manufacturing activities of
products A, B & C. Manager X manages product A and Manager B manages products B & C.
The operating results of health care products (product A) and food and grocery products
(products B & C) are regularly reviewed by the CODM.
Identify reportable segments of ABC Ltd.
Solution
In this situation both the healthcare, and food and grocery product line meet the criteria for
operating segments set out above. Therefore, it is likely that ABC Ltd.’s operating segments
would be classified as being (i) healthcare and (ii) food and grocery segments.
Not every part of an entity is necessarily an operating segment or part of an operating segment.
For example, a corporate headquarters or some functional departments may not earn revenues
or may earn revenues that are only incidental to the activities of the entity and would not be
operating segments. For the purposes of Ind AS 108, an entity’s post-employment benefit plans
are not operating segments.
*****
3.3.1 Functions that are integral to business
In case of a company, where the activities of a function are an integral part of company’s
business (for example, research and development function for a pharmaceuticals or software
company), this can be considered as an operating function provided that there is discrete
information available that is regularly reviewed by the CODM.
3.3.2 Discontinued operations – whether an operating segment
If the discontinued operation
— continues to engage in business activities;
— whose operating results are reviewed by the CODM; and
— there is discrete information available to support the review
Then, it would meet the definition of an operating segment.
The term ‘chief operating decision maker’ (CODM) identifies a function, not necessarily a
manager with a specific title. That function is to allocate resources to and assess the

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.103

performance of the operating segments of an entity. Often the CODM of an entity is its chief
executive officer or chief operating officer but, for example, it may be a group of executive
directors or others.
For many entities, the three characteristics of operating segments clearly identify its operating
segments. However, an entity may produce reports in which its business activities are
presented in a variety of ways. If the CODM uses more than one set of segment information,
other factors may identify a single set of components as constituting an entity’s operating
segments, including the nature of the business activities of each component, the existence of
managers responsible for them, and information presented to the board of directors.
Illustration 2
The CEO along with other Board members do a review of financial information about various
business segments and take decisions on the basis of discrete information available for these
segments and are correctly identified as Chief Operating Decision Maker (CODM). Review of
only revenue information is done for decision making about those segments by the CODM. As
per CODM, many segments require minimal costs due to centralization of costs.
Analyse whether the review of only the revenue related information is sufficient for these
segments to be considered as operating segments for the purposes of Ind AS 108 ‘Operating
Segments’.
Solution
Many entities would be considering the decision making for segments on the basis of revenue
growth – especially the ones aggressively trying to build a market share. Common examples
would be businesses in the technology sector or those creating or launching new products from
time to time. For them, the decision making for different regional segments would need revenue
growth and related information for further investment decisions.
Merely examining revenue data by CODM without taking into account the corresponding
expenses involved in generating that revenue may not provide adequate insights for determining
how to allocate resources and measure the performance of a segment.
However, in the instant case, the logic given by the CODM is that since many segments require
minimal costs (due to centralization of costs), therefore, revenue-only data is a fair
representation of the operating results.
In the above case, review of the information that is based only on revenue data may be
appropriate to consider that the segment meets the definition of an operating segment.
*****
Whether a committee of non-executive directors (NEDs) is likely to be the CODM.
NEDs are not usually involved in resource allocation decisions, other than at a very high level.
Their role is primarily related to governance than a management role. Accordingly, it may be
difficult to establish if they would meet the definition of the CODM.

© The Institute of Chartered Accountants of India

 10.104 2. a
FINANCIAL REPORTING
104 v
v
However, a function (Board of directors), might include non-executive directors whose sole
responsibility is governance. Such a function would be a CODM if the most significant
operating, as well as strategic, decisions are made by that function, even if those non-executive
directors do not participate in implementing such decisions.
Overlapping sets of components
Generally, an operating segment has a segment manager who is directly accountable to and
maintains regular contact with the CODM to discuss operating activities, financial results,
forecasts, or plans for the segment. The term ‘segment manager’ identifies a function, not
necessarily a manager with a specific title. The chief operating decision maker also may be the
segment manager for some operating segments. A single manager may be the segment
manager for more than one operating segment. If the characteristics apply to more than one set
of components of an organisation but there is only one set for which segment managers are held
responsible, that set of components constitutes the operating segments.
The characteristics may apply to two or more overlapping sets of components for which
managers are held responsible. That structure is sometimes referred to as a matrix form of
organisation. For example, in some entities, some managers are responsible for different
product and service lines worldwide, whereas other managers are responsible for specific
geographical areas. The CODM regularly reviews the operating results of both sets of
components, and financial information is available for both. In that situation, the entity should
determine which set of components constitutes the operating segments by reference to the core
principle.

Is the component able to earn revenues?

No
Yes
Not an operating segment

Are the component’s results reviewed regularly by the CODM?

No
Yes

Is discrete financial information for the component available?

No
Yes

Operating segment

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.105

Illustration 3
X Ltd. is engaged in the manufacture and sale of two distinct type of products A & B. X Ltd.
supplies the product in the domestic market in India as well as in Singapore. There are two
regional managers responsible for manufacturing activities of product A & B worldwide and also
two other managers responsible for different geographical areas. For internal reporting
purposes, X Ltd. provides information product-wise and as per the geographical location of the
company. The CODM regularly reviews the operating results of both sets of components.
Comment, how should X Ltd. identify its operating segments.
Solution
In this situation, both the geographical sales areas and product areas may meet the criteria for
operating segment. However, in such situation, it is more difficult to determine clearly which set
of components should be identified as the entity’s operating segments. In such situation the
entity should determine which set of components constitutes the operating segments by
reference to the core principle. The core principle is that the entity should disclose information
to enable users of its financial statements to evaluate the nature and financial effects of the
business activities in which it engages and the economic environments in which it operates. The
entity should also assess whether the identified operating segments could realistically represent
the level at which the CODM is assessing performance and allocating resources.
Therefore, X Ltd. should consider all the above factors and apply judgement to determine which
component should be disclosed as operating segment.
*****
Illustration 4
CODM of XY Ltd. receives and reviews multiple sets of information when assessing the
businesses’ overall performance to take a decision on resources allocation. It receives the
information as under:
- Level 1 Report: Summary report for all 4 regions
- Level 2 Report: Summary report for 20 Sub-regions within those regions
- Level 3 Report: Detailed report for 50 Branches within the sub-regions
State what factors and level should be considered for determining an operating segment.
Solution
We need to consider multiple factors (including but not limited to below):
— The process that CODM may use to assess the performance (Key Financial Matrix, KPIs,
Ratio etc.);
— Identify the segment managers and their responsibility areas;
— The process of budgeting for resource allocations.
*****

© The Institute of Chartered Accountants of India

 10.106 2. a
FINANCIAL REPORTING
106 v
v

3.4 REPORTABLE SEGMENTS

An entity should report separately information about each operating segment that:
(a) has been identified or results from aggregating two or more of those segments; and
(b) exceeds the quantitative thresholds.
Standard specifies other situations in which separate information about an operating segment
should be reported.

Identify CODM

Identify operating segments

Determine reportable operating segments

Disclose information about each reportable segments

3.5 AGGREGATION CRITERIA

Operating segments often exhibit similar long-term financial performance if they have similar
economic characteristics. For example, similar long-term average gross margins for two
operating segments would be expected if their economic characteristics were similar. Two or
more operating segments may be aggregated into a single operating segment if aggregation is
consistent with the core principle of Ind AS 108, the segments have similar economic
characteristics, and the segments are similar in each of the following respects:
(a) the nature of the products and services;
(b) the nature of the production processes;
(c) the type or class of customer for their products and services;
(d) the methods used to distribute their products or provide their services; and
(e) if applicable, the nature of the regulatory environment, for example, banking, insurance or
public utilities.

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.107

Illustration 5
XY Ltd. has operations in France, Italy, Germany, UK and India. It wishes to apply aggregation
criteria on geographical basis.
State, how will the aggregation criteria apply for reporting segments in the given scenario.
Solution
XY Ltd. needs to assess and prove that each country possesses the same economic
characteristics. Factors including exchange control regulations, currency risks and economic
conditions are required to be considered.
Considering above factors, it may be possible to aggregate the results of France, Italy and
Germany (falling within EU region) and results of UK and India may be separately reported (no
aggregation is permitted).
*****

Two or more operating segments may be aggregated into a single operating segment if

All

aggregation is consistent with the segments have similar the segments are
the core principle of this Ind AS economic characteristics similar in respect to

the nature of the products and services

the nature of the production processes

the type or class of customer for their products and services All

the methods used to distribute their products or provide their

services

the nature of the regulatory environment, if applicable

Illustration 6
X Ltd. is engaged in the business of manufacturing and selling papers. Varieties of paper like
adhesive paper, anti-rust paper, antique paper, art paper etc., are manufactured and sold by X Ltd.
State whether X Ltd. should classify these papers into different segments.

© The Institute of Chartered Accountants of India

 10.108 2. a
FINANCIAL REPORTING
108 v
v
Solution
Two or more operating segments may be aggregated into a single operating segment if the
segments have similar economic characteristics, and the segments are similar with respect to
various factors like nature of the product and production process, type of customers, method of
distribution and regulatory requirement.
In case of X Ltd., so far as varieties of paper concerned, if all factors such as nature of the
product and production process, type of customers, method of distribution and regulatory
requirement are common, there is no need to create different segments for each type of paper.
*****
Illustration 7
T Ltd is engaged in transport sector, running a fleet of buses at different routes. T Ltd has
identified 3 operating segments:
- Segment 1: Local Route
- Segment 2: Inter-city Route
- Segment 3: Contract Hiring
The characteristics of each segment are as under:
Segment 1: The local transport authority awards the contract to ply the buses at different routes
for passengers. These contracts are awarded following a competitive tender process; the ticket
price paid by passengers are controlled by the local transport authority. T Ltd would charge the
local transport authority on a per kilometer basis.
Segment 2: T Ltd operates buses from one city to another, prices are set by T Ltd on the basis
of services provided (Deluxe, Luxury or Superior).
Segment 3: T Ltd also leases buses to schools under a long-term arrangement.
While Segment 1 has been showing significant decline in profitability, Segment 2 is performing
well in respect of higher revenues and improved margins. The management of the company is
not sure why is the segment information relevant for users when they should only be concerned
about the returns from overall business. They would like to aggregate the Segment 1 and
Segment 2 for reporting under ‘Operating Segment’
Required:
State whether it is appropriate to aggregate Segments 1 and 2 with reference to Ind AS 108
‘Operating Segments’; and also discuss, in the above context, whether disclosure of segment
information is relevant to an investor’s appraisal of financial statements.

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.109

Solution
Ind AS 108 ‘Operating Segments’ requires operating segments to be aggregated to present a
reportable segment if the segments have similar economic characteristics, and the segments are
similar in each of the following aggregation criteria:
(a) The nature of the products and services
(b) The nature of the production process
(c) The type or class of customer for their products and services
(d) The methods used to distribute their products or provide their services
(e) If applicable, the nature of the regulatory environment
While the products and services are similar, the customers for those products and services are
different.
In Segment 1, the decision to award the contract is in the hands of the local authority, which
also sets prices and pays for the services. The company is not exposed to passenger revenue
risk, since a contract is awarded by competitive tender.
On the other hand, in the inter-city segment, the customer determines whether a bus route is
economically viable by choosing whether or not to buy tickets. T Ltd sets the ticket prices but
will be affected by customer behavior or feedback. T Ltd is exposed to passenger revenue-risk,
as it sets prices which customers may or may not choose to pay.
Operating Segment provides information that makes the financial statements more useful to
investors. In making the investment decisions, investors and creditors consider the returns they
are likely to make on their investment. This requires assessment of the amount, timing and
uncertainty of the future cash flows of T Ltd as well as of management's stewardship of T Ltd’s
resources. How management derives profit is therefore relevant information to an investor.
Inappropriately aggregating segments reduces the usefulness of segment disclosures to
investors. Ind AS 108 requires information to be disclosed that is not readily available
elsewhere in the financial statements, therefore it provides additional information which aids an
investor's understanding of how the business operates and is managed.
In T Ltd.’s case, if the segments are aggregated, then the increased profits in segment 2 will
hide the decreased profits in segment 1. However, the fact that profits have sharply declined in
segment 1 would be of interest to investors as it may suggest that future cash flows from this
segment are at risk.
It is not mandatory to aggregate segments. An entity, if desires, can disclose separately
information about segments that meet all the criteria. However, with regard to upper limit on
number of segments to be reported, the entity should consider whether a practical limit has been
reached.
*****

© The Institute of Chartered Accountants of India

 10.110 2. a
FINANCIAL REPORTING
110 v
v

3.6 QUANTITATIVE THRESHOLDS

An entity should report separately information about an operating segment that meets any of the
following quantitative thresholds:
(a) Its reported revenue, including both sales to external customers and intersegment sales or
transfers, is 10% or more of the combined revenue, internal and external, of all operating
segments.
(b) Its reported profit or loss is 10% or more, in absolute amount, of the greater, in absolute
amount, of
(i) the combined reported profit of all operating segments that did not report a loss and
(ii) the combined reported loss of all operating segments that reported a loss.
(c) Its assets are 10% or more of the combined assets of all operating segments. Operating
segments that do not meet any of the quantitative thresholds may be considered reportable
and separately disclosed, if management believes that information about the segment
would be useful to users of the financial statements.
Whether reported revenue (both external and internal sales) of an
Yes
operating segment is 10% or more of the combined revenue, of all
operating segments?

Report separately information about an operating segment

No

Whether the absolute amount of reported profit or loss is 10% or more,

in absolute amount, of the greater of Yes
(i) the combined reported profit of all operating segments that did
not report a loss and
(ii) the combined reported loss of all operating segments that
reported a loss?

No
Yes
Whether the assets are 10% or more of the combined assets of all
operating segments?

No
Yes
Whether the management believes that information about the segment
would be useful to users of the financial statements?

No

Do not report separately information about an operating segment

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.111

Illustration 8
X Ltd. has identified the following business components.
Segment Revenue ( ) Profit ( ) Assets ( )
External Internal
Pharma 97,00,000 Nil 20,00,000 55,00,000
FMCG Nil 4,00,000 2,50,000 25,00,000
Ayurveda 3,00,000 Nil 2,00,000 4,00,000
Others 8,00,000 41,00,000 5,50,000 6,00,000
Total for the entity 1,08,00,000 45,00,000 30,00,000 90,00,000
Which of the segments would be reportable as per the criteria prescribed in Ind AS108?
Solution
Quantitative thresholds are calculated below:

Segments Pharma FMCG Ayurveda Others

% segment sales to total sales 63.40 2.61 1.96 32.03
% segment profit to total profits 66.67 8.33 6.67 18.33
% segment assets to total assets 61.11 27.78 4.44 6.67

Segment Pharma would separately reportable since they meet all three size criteria, though any
one criteria is required. FMCG segment does not satisfy the revenue and profit test but does
satisfy the asset test. So it would be separately reportable. Ayurveda segment does not meet
any threshold. It may not be classified as reportable segment.
*****
An entity may combine information about operating segments that do not meet the quantitative
thresholds with information about other operating segments that do not meet the quantitative
thresholds to produce a reportable segment only if the operating segments have similar
economic characteristics and share a majority of the aggregation criteria.
If the total external revenue reported by operating segments constitutes less than 75% of the
entity’s revenue, additional operating segments should be identified as reportable segments
(even if they do not meet the criteria) until at least 75% of the entity’s revenue is included in
reportable segments.
Note
 External revenue of reportable segments must be ≥ 75% of total revenue of the entity.
 Operating segments that do not meet any of the quantitative thresholds may be considered
reportable, and separately disclosed, if information about the segment is useful to users.

© The Institute of Chartered Accountants of India

 10.112 2. a
FINANCIAL REPORTING
112 v
v
Non-reportable segments – After the appropriate aggregation and requisite tests are done (i.e.
10% tests done and 75% test met), information about other business activities and operating
segments that are not reportable should be combined and disclosed in an ‘all other segments’
category separately from other reconciling items in the reconciliations. The sources of the
revenue included in the ‘all other segments’ category should be described.
If management judges that an operating segment identified as a reportable segment in the
immediately preceding period is of continuing significance, information about that segment
should continue to be reported separately in the current period even if it no longer meets the
criteria for reputability.
If an operating segment is identified as a reportable segment in the current period in accordance
with the quantitative thresholds, segment data for a prior period presented for comparative
purposes should be restated to reflect the newly reportable segment as a separate segment,
even if that segment did not satisfy the criteria for reportability in the prior period, unless the
necessary information is not available and the cost to develop it would be excessive.
There may be a practical limit to the number of reportable segments that an entity separately
discloses beyond which segment information may become too detailed. Although no precise
limit has been determined, as the number of segments that are reportable increases above ten,
the entity should consider whether a practical limit has been reached.
Illustration 9
An entity has branches in different parts of the country – catering to different customers and
selling local made products (a product of one region is not sold in any other region). No region
or product contributes more than 5% to total revenue of the entity.
Discuss how many segments are reportable.
Solution
Under the quantitative threshold, external revenue of reportable segments must be ≥ 75% of
total revenue of the entity. Considering above case, minimum 15 operating segments need to
be reportable (75% [threshold] / 5% {revenue}).
*****

3.7 DISCLOSURE
An entity should disclose information to enable users of its financial statements to evaluate the
nature and financial effects of the business activities in which it engages and the economic
environments in which it operates.
An entity should disclose the following for each period for which a statement of profit and loss is
presented:

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.113

(a) general information;

(b) information about reported segment profit or loss, including specified revenues and
expenses included in reported segment profit or loss, segment assets, segment liabilities
and the basis of measurement; and
(c) reconciliations of the totals of segment revenues, reported segment profit or loss, segment
assets, segment liabilities and other material segment items to corresponding entity
amounts.
Reconciliations of the amounts in the balance sheet for reportable segments to the amounts in
the entity’s balance sheet are required for each date at which a balance sheet is presented.
Information for prior periods should be restated.
3.7.1 General Information
An entity should disclose the following general information:
(a) factors used to identify the entity’s reportable segments, including the basis of organisation
(for example, whether management has chosen to organise the entity around differences in
products and services, geographical areas, regulatory environments, or a combination of
factors and whether operating segments have been aggregated); and
(b) the judgements made by management in applying the aggregation criteria. This includes a
brief description of the operating segments that have been aggregated in this way and the
economic indicators that have been assessed in determining that the aggregated operating
segments share similar economic characteristics; and
(c) types of products and services from which each reportable segment derives its revenues.
3.7.1.1 Factors that management used to identify the entity’s reportable segments
Diversified Company’s reportable segments are strategic business units that offer different
products and services. They are managed separately because each business requires different
technology and marketing strategies. Most of the businesses were acquired as individual units,
and the management at the time of the acquisition was retained.
3.7.1.2 Description of the types of products and services from which each
reportable segment derives its revenues
Diversified Company has five reportable segments: car parts, motor vessels, software,
electronics and finance. The car parts segment produces replacement parts for sale to car parts
retailers. The motor vessels segment produces small motor vessels to serve the offshore oil
industry and similar businesses. The software segment produces application software for sale
to computer manufacturers and retailers. The electronics segment produces integrated circuits
and related products for sale to computer manufacturers. The finance segment is responsible
for portions of the company’s financial operations including financing customer purchases of

© The Institute of Chartered Accountants of India

 10.114 2. a
FINANCIAL REPORTING
114 v
v
products from other segments and property lending operations.
Extract from Annual Report for 2021-2022 of Hindustan Unilever Limited

3.7.2 Information about profit or loss, assets and liabilities

An entity should report a measure of profit or loss for each reportable segment. An entity should
report a measure of total assets and liabilities for each reportable segment if such amounts are
regularly provided to CODM. An entity should also disclose the following about each reportable
segment if the specified amounts are included in the measure of segment profit or loss reviewed
by the CODM, or are otherwise regularly provided to the CODM, even if not included in that
measure of segment profit or loss:
(a) revenues from external customers;
(b) revenues from transactions with other operating segments of the same entity;
(c) interest revenue;
(d) interest expense;
(e) depreciation and amortisation;
(f) material items of income and expense disclosed in accordance with Ind AS 1, Presentation
of Financial Statements;
(g) the entity’s interest in the profit or loss of associates and joint ventures accounted for by
the equity method;
(h) income tax expense or income; and
(i) material non-cash items other than depreciation and amortisation.
An entity should report interest revenue separately from interest expense for each reportable
segment unless a majority of the segment’s revenues are from interest and the CODM relies
primarily on net interest revenue to assess the performance of the segment and make decisions
about resources to be allocated to the segment. In that situation, an entity may report that
segment’s interest revenue net of its interest expense and disclose that it has done so.

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.115

An entity should disclose the following about each reportable segment if the specified amounts
are included in the measure of segment assets reviewed by the CODM or are otherwise
regularly provided to the CODM, even if not included in the measure of segment assets:
(a) the amount of investment in associates and joint ventures accounted for by the equity
method; and
(b) the amounts of additions to non-current assets (For assets classified according to a
liquidity presentation, non-current assets are assets that include amounts expected to be
recovered more than twelve months after the reporting period) other than financial
instruments, deferred tax assets, net defined benefit assets (in accordance with Ind AS 19,
Employee Benefits) and rights arising under insurance contracts.
The following table illustrates a suggested format for disclosing information about segment profit
or loss, assets and liabilities. The same type of information is required for each year for which a
statement of profit and loss is presented. Diversified Company does not allocate tax expense
(tax income) or non-recurring gains and losses to reportable segments. In addition, not all
reportable segments have material non-cash items other than depreciation and amortisation in
profit or loss. The amounts in this illustration are assumed to be the amounts in reports used by
the CODM.
Information about reportable segment profit or loss, assets and liabilities

Car Motor Software Electronics Finance All Total

parts vessels others

Revenue from external customers 3,000 5,000 9,500 12,000 5,000 1,000 (a) 35,500

Inter-segment revenues - - 3,000 1,500 - - 4,500

Interest revenue 450 800 1,000 1,500 - - 3,750

Interest expense 350 600 700 1,100 - - 2,750

Net interest revenue (b) - - - 1,000

Depreciation and amortisation 200 100 50 1,500 1,100 - 2,950

Reportable Segment profit 200 70 900 2,300 500 100 4,070

Other material Non-cash item:

Impairment of assets - 200 - - - - 200

Reportable segment assets 2,000 5,000 3,000 12,000 57,000 2,000 81,000

© The Institute of Chartered Accountants of India

 10.116 2. a
FINANCIAL REPORTING
116 v
v
Expenditures for reportable 300 700 500 800 600 - 2,900
segment non- current assets

Reportable segment liabilities 1,050 3,000 1,800 8,000 30,000 43,850

(a) Revenues from segments below the quantitative thresholds are attributable to four operating
segments of Diversified Company. Those segments include a small property business, an
electronics equipment rental business, a software consulting practice and a warehouse leasing
operation. None of those segments has ever met any of the quantitative thresholds for
determining reportable segments.
(b) Thefinance segment derives a majority of its revenue from interest. Management primarily
relies on net interest revenue, not the gross revenue and expense amounts, in managing that
segment. Therefore, only the net amount is disclosed.
Extract from Annual Report for 2021-2022 of Hindustan Unilever Limited

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.117

© The Institute of Chartered Accountants of India

 10.118 2. a
FINANCIAL REPORTING
118 v
v

3.8 MEASUREMENT
The amount of each segment item reported should be the measure reported to the CODM for the
purposes of making decisions about allocating resources to the segment and assessing its
performance. Adjustments and eliminations made in preparing an entity’s financial statements
and allocations of revenues, expenses, and gains or losses should be included in determining
reported segment profit or loss only if they are included in the measure of the segment’s profit or
loss that is used by the chief operating decision maker. Similarly, only those assets and
liabilities that are included in the measures of the segment’s assets and segment’s liabilities that
are used by the chief operating decision maker should be reported for that segment. If amounts
are allocated to reported segment profit or loss, assets or liabilities, those amounts should be
allocated on a reasonable basis.
If the CODM uses only one measure of an operating segment’s profit or loss, the segment’s
assets or the segment’s liabilities in assessing segment performance and deciding how to
allocate resources, segment profit or loss, assets and liabilities should be reported at those
measures. If the CODM uses more than one measure of an operating segment’s profit or loss,
the segment’s assets or the segment’s liabilities, the reported measures should be those that
management believes are determined in accordance with the measurement principles most
consistent with those used in measuring the corresponding amounts in the entity’s financial
statements.
An entity should provide an explanation of the measurements of segment profit or loss, segment
assets and segment liabilities for each reportable segment. At a minimum, an entity should
disclose the following:
(a) the basis of accounting for any transactions between reportable segments;

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.119

(b) the nature of any differences between the measurements of the reportable segments’
profits or losses and the entity’s profit or loss before income tax expense or income and
discontinued operations (if not apparent from the reconciliations). Those differences could
include accounting policies and policies or allocation of centrally incurred costs that are
necessary for an understanding of the reported segment information;
(c) the nature of any differences between the measurements of the reportable segments’
assets and the entity’s assets (if not apparent from the reconciliations. Those differences
could include accounting policies and policies for allocation of jointly used assets that are
necessary for an understanding of the reported segment information;
(d) the nature of any differences between the measurements of the reportable segments’
liabilities and the entity’s liabilities (if not apparent from the reconciliations. Those
differences could include accounting policies and policies for allocation of jointly utilised
liabilities that are necessary for an understanding of the reported segment information;
(e) the nature of any changes from prior periods in the measurement methods used to
determine reported segment profit or loss and the effect, if any, of those changes on the
measure of segment profit or loss; and
(f) the nature and effect of any asymmetrical allocations to reportable segments. For
example, an entity might allocate depreciation expense to a segment without allocating the
related depreciable assets to that segment.
Illustration 10
GH Ltd. has four distinct operating segments. The management of GH is concerned as it is
unsure on how common costs be reasonably allocated to different operating segments. They
intend to allocate management charges, interest costs of internal funding, cost of management
of properties and pension costs.
Analyse, whether such costs need to conform to the accounting policies as used to prepare the
financial statements.
Solution
Ind AS 108 does not prescribe any specific basis but suggests that a reasonable basis to be
used in allocation of common costs. Here, it may not be reasonable to allocate management
charges to most profitable segment. However, it may be reasonable to charge interest costs of
internal funding on the basis of actual usage over time, even if majority of funds are used for
running a loss-making segment.
A reasonable manner of allocation of above costs could be:
Management Charges: These may be allocated based on Net Assets invested or Revenue
earned by the segments. It needs to be understood if there is an operating segment which is yet

© The Institute of Chartered Accountants of India

 10.120 2. a
FINANCIAL REPORTING
120 v
v
to earn revenue, it would fail to have any costs being allocated.
Interest costs: As mentioned above, these may be allocated on the basis of actual usage and
time.
Cost of management of properties: Based on value of property used at each segment.
Pension costs: Based on salary expenses of each segment.
*****
Measurement of operating segment profit or loss, assets and liabilities
The accounting policies of the operating segments are the same as those described in the
significant accounting policies except that pension expense for each operating segment is
recognised and measured based on cash payments to the pension plan. Diversified Company
evaluates performance based on profit or loss from operations before tax expense not including
non-recurring gains and losses and foreign exchange gains and losses.
Diversified Company accounts for inter-segment sales and transfers as if the sales or transfers
were to third parties, i.e., at current market prices.
3.8.1 Reconciliations
An entity should provide reconciliations of all of the following:
(a) the total of the reportable segments’ revenues to the entity’s revenue;
(b) the total of the reportable segments’ measures of profit or loss to the entity’s profit or loss
before tax expense (tax income) and discontinued operations. However, if an entity
allocates to reportable segments items such as tax expense (tax income), the entity may
reconcile the total of the segments’ measures of profit or loss to the entity’s profit or loss
after those items;
(c) the total of the reportable segments’ assets to the entity’s assets if the segment assets are
reported;
(d) the total of the reportable segments’ liabilities to the entity’s liabilities if segment liabilities
are reported; and
(e) the total of the reportable segments’ amounts for every other material item of information
disclosed to the corresponding amount for the entity.
All material reconciling items should be separately identified and described. For example, the
amount of each material adjustment needed to reconcile reportable segment profit or loss to the
entity’s profit or loss arising from different accounting policies should be separately identified
and described.

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.121

The following illustrate reconciliations of reportable segment revenues, profit or loss, assets and
liabilities to the entity’s corresponding amounts. Reconciliations also are required to be shown
for every other material item of information disclosed. The entity’s financial statements are
assumed not to include discontinued operations. The entity recognises and measures pension
expense of its reportable segments on the basis of cash payments to the pension plan, and it
does not allocate certain items to its reportable segments.
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities
Revenues
Total revenues for reportable segments 39,000
Other revenues 1,000
Elimination of intersegment revenues (4,500)
Entity’s revenues 35,500
Profit or Loss
Total profit or loss for reportable segments 3,970
Other profit or loss 100
Elimination of intersegment profits (500)
Unallocated amounts:
Litigation settlement received 500
Other corporate expenses (750)
Adjustment to pension expense in consolidation (250)
Income before income tax expense 3,070
Assets
Total assets for reportable segments 79,000
Other assets 2,000
Elimination of receivable from corporate headquarters (1,000)
Other unallocated amounts 1,500
Entity’s assets 81,500
Liabilities
Total liabilities for reportable segments 43,850
Unallocated defined benefit pension liabilities 25,000
Entity’s liabilities 68,850

© The Institute of Chartered Accountants of India

 10.122 2. a
FINANCIAL REPORTING
122 v
v
Other material items Reportable Adjustments Entity totals
Segment totals

Interest revenue 3,750 75 3,825

Interest expenses 2,750 (50) 2,700
Net interest revenue 1,000 - 1,000
(finance segment only)
Expenditure for assets 2,900 1,000 3,900
Depreciation and amortisation 2,950 - 2,950
Impairment of assets 200 - 200

The reconciling item to adjust expenditures for assets is the amount incurred for the corporate
headquarters building, which is not included in segment information. None of the other
adjustments are material.

3.9 RESTATEMENT OF PREVIOUSLY REPORTED

INFORMATION
If an entity changes the structure of its internal organisation in a manner that causes the
composition of its reportable segments to change, the corresponding information for earlier
periods, including interim periods, should be restated unless the information is not available and
the cost to develop it would be excessive. The determination of whether the information is not
available and the cost to develop it would be excessive should be made for each individual item
of disclosure. Following a change in the composition of its reportable segments, an entity
should disclose whether it has restated the corresponding items of segment information for
earlier periods.
If an entity has changed the structure of its internal organisation in a manner that causes the
composition of its reportable segments to change and if segment information for earlier periods,
including interim periods, is not restated to reflect the change, the entity should disclose in the
year in which the change occurs segment information for the current period on both the old basis
and the new basis of segmentation, unless the necessary information is not available and the
cost to develop it would be excessive.

3.10 ENTITY-WIDE DISCLOSURES

Some entities’ business activities are not organised on the basis of differences in related
products and services or differences in geographical areas of operations. Such an entity’s
reportable segments may report revenues from a broad range of essentially different products

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.123

and services, or more than one of its reportable segments may provide essentially the same
products and services. Similarly, an entity’s reportable segments may hold assets in different
geographical areas and report revenues from customers in different geographical areas, or more
than one of its reportable segments may operate in the same geographical area. Certain
information required should be provided only if it is not provided as part of the reportable
segment information required by Ind AS 108.
3.10.1 Information about products and services
An entity should report the revenues from external customers for each product and service, or
each group of similar products and services, unless the necessary information is not available
and the cost to develop it would be excessive, in which case that fact should be disclosed. The
amounts of revenues reported should be based on the financial information used to produce the
entity’s financial statements.
Extract from Annual Report for 2021-2022 of Hindustan Unilever Limited

3.10.2 Information about geographical areas

An entity should report the following geographical information, unless the necessary information
is not available and the cost to develop it would be excessive:
(a) revenues from external customers
(i) attributed to the entity’s country of domicile and
(ii) attributed to all foreign countries in total from which the entity derives revenues. If
revenues from external customers attributed to an individual foreign country are
material, those revenues should be disclosed separately. An entity should disclose
the basis for attributing revenues from external customers to individual countries; and

© The Institute of Chartered Accountants of India

 10.124 2. a
FINANCIAL REPORTING
124 v
v
(b) non-current assets (For assets classified according to a liquidity presentation, non-current
assets are assets that include amounts expected to be recovered more than twelve months
after the reporting period) other than financial instruments, deferred tax assets, post-
employment benefit assets, and rights arising under insurance contracts (i) located in the
entity’s country of domicile and (ii) located in all foreign countries in total in which the entity
holds assets. If assets in an individual foreign country are material, those assets should be
disclosed separately.
The amounts reported should be based on the financial information that is used to produce the
entity’s financial statements. If the necessary information is not available and the cost to
develop it would be excessive, that fact should be disclosed. An entity may provide, in addition
to the information required by this paragraph, subtotals of geographical information about
groups of countries.
The following illustrates the geographical information required (Because Diversified Company's
reportable segments are based on differences in products and services, no additional
disclosures of revenue information about products and services are required.)
Geographical Information Revenue (a) Non-Current Assets

United States 19,000 11,000

Canada 4,200 -
China 3,400 6,500
Japan 2,900 3,500
Other countries 6,000 3,000
Total 35,500 24,000
Revenue are attributed to countries on the basis of the customer’s location.
Extract from Annual Report for 2021-2022 of Hindustan Unilever Limited

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.125

3.10.3 Information about major customers

An entity should provide information about the extent of its reliance on its major customers. If
revenues from transactions with a single external customer amount to 10% or more of an entity’s
revenues, the entity should disclose that fact, the total amount of revenues from each such
customer, and the identity of the segment or segments reporting the revenues. The entity need
not disclose the identity of a major customer or the amount of revenues that each segment
reports from that customer. For the purposes of Ind AS 108, a group of entities known to a
reporting entity to be under common control should be considered a single customer. However,
judgement is required to assess whether a government (including government agencies and
similar bodies whether local, national or international) and entities known to the reporting entity
to be under the control of that government are considered a single customer. In assessing this,
the reporting entity should consider the extent of economic integration between those entities.
The following illustrates the information about major customers. Neither the identity of the
customer nor the amount of revenues for each operating segment is required.
Revenues from one customer of Diversified Company's software and electronics segments
represent approximately 5,000 of the Company's total revenues.
Extract from Annual Report for 2021-22 of Hindustan Unilever Limited

Diagram to assist in identifying reportable segments

The following diagram illustrates how to apply the main provisions for identifying reportable
segments as defined in Ind AS 108.

© The Institute of Chartered Accountants of India

 10.126 2. a
FINANCIAL REPORTING
126 v
v
Overall determination of reportable operating segments based on management
reporting system

Do some operating Yes Aggregate segments

segments meet all
aggregation criteria? if desired

No

Yes Do some operating

segments meet the
quantitative thresholds?

No

Yes Do some remaining

Aggregate segments
operating segments
if desired
meet a majority of the
aggregation criteria?

No

Do identified reportable
Yes
segments account for
75% of the entity
revenue?

No
These are reportable
segments to be Report additional segment if
external revenue of all segment Aggregate remaining
disclosed is less than 75% of the entity’s segments into ‘all other
revenue segments’ category

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.127

3.11 SIGNIFICANT DIFFERENCES IN IND AS 108 VIS-A-VIS

AS 17
S. Particulars Ind AS 108 AS 17
No.
1. Approach for Identification of segments under AS 17 requires identification of
identification of Ind AS 108 is based on two sets of segments; one
segments ‘management approach’ i.e., based on related products and
operating segments are services, and the other on
identified based on the internal geographical areas based on
reports regularly reviewed by the risks and returns approach.
the entity’s chief operating One set is regarded as primary
decision maker. segments and the other as
secondary segments.
2. Basis for reporting Ind AS 108 requires that the AS 17 requires segment
the segments amounts reported for each information to be prepared in
operating segment should be conformity with the accounting
measured on the same basis as policies adopted for preparing
that used by the chief operating and presenting the financial
decision maker for the purposes statements.
of allocating resources to the Accordingly, AS 17 defines
segments and assessing its segment revenue, segment
performance. It does not define expense, segment result,
the terms segment revenue, segment assets and segment
segment expense, segment liabilities.
result, segment assets and
segment liabilities.
3. Aggregation criteria Ind AS 108 specifies AS 17 does not deal specifically
aggregation criteria for with this aspect.
aggregation of two or more
segments and also requires the
related disclosures in this
regard.
4. Disclosure in case of Ind AS 108 requires certain AS 17 states that in case there
single reporting disclosures even in case of is neither more than one
segment entities having single reportable business segment nor more
segment. than one geographical segment,

© The Institute of Chartered Accountants of India

 10.128 2. a
FINANCIAL REPORTING
128 v
v
segment information as per this
standard is not required to be
disclosed. However, this fact
shall be disclosed by way of
footnote.
5. Disclosure of Ind AS 108 requires separate As per AS 17, interest expense
Interest disclosures about interest relating to overdrafts and other
revenue and interest expense operating liabilities identified to
of each reportable segment, a particular segment should not
therefore, these aspects have be included as a part of the
not been specifically dealt with. segment expense. It also
provides that in case interest is
included as a part of the cost of
inventories and those
inventories are part of segment
assets of a particular segment,
such interest should be
considered as a segment
expense. These aspects are
specifically dealt with keeping in
view that the definition of
‘segment expense’ given in AS
17 excludes interest.
6. Disclosure basis Ind AS 108 requires disclosures Disclosures in AS 17 are based
of revenues from external on the classification of the
customers for each product and segments as primary or
service. Regarding secondary segments.
geographical information, it Disclosure requirements for
requires the disclosure of primary segments are more
revenues from customers in the detailed as compared to
country of domicile and in all secondary segments.
foreign countries, non-current
assets in the country of
domicile and all foreign
countries. It also requires
disclosure of information about
major customers.

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.129

FOR SHORTCUT TO IND AS WISDOM: SCAN ME!

TEST YOUR KNOWLEDGE

Questions
1. X Ltd. has identified 4 operating segments for which revenue data is given below:

External Revenue ( ) Internal Revenue ( ) Total ( )

Segment A 30,00,000 Nil 30,00,000

Segment B 6,50,000 Nil 6,50,000

Segment C 8,50,000 1,00,000 9,50,000

Segment D 5,00,000 49,00,000 54,00,000
Total Revenue 50,00,000 50,00,000 1,00,00,000

Additional information:
Segment C is a new business unit and management expect this segment to make a
significant contribution to external revenue in coming years.
Which of the segments would be reportable under the criteria identified in Ind AS 108?
2. X Ltd. operates in coating industry. Its business segments comprise Coating (consisting of
decorative, automotive, industrial paints and related activities) and Others (consisting of
chemicals, polymers and related activities). Certain information for financial year
20X1-20X2 is given below: ( in lakhs)
Segments External Revenue GST Other operating Result Asset Liabilities
(including GST) income
Coating 2,00,000 5,000 40,000 10,000 50,000 30,000
Others 70,000 3,000 15,000 4,000 30,000 10,000

© The Institute of Chartered Accountants of India

 10.130 2. a
FINANCIAL REPORTING
130 v
v
Additional information:
1. Unallocated income net of expenses is 30,00,00,000
2. Interest and bank charges is 20,00,00,000
3. Income tax expenses is 20,00,00,000 (current tax 19,50,00,000 and deferred tax
50,00,000)
4. Unallocated Investments are 1,00,00,00,000 and other assets are 1,00,00,00,000.
5. Unallocated liabilities, Reserves & surplus and share capital are 2,00,00,00,000,
3,00,00,00,000 & 1,00,00,00,000 respectively.
6. Depreciation amounts for coating & others are 10,00,00,000 and 3,00,00,000
respectively.
7. Capital expenditure for coating and others are 50,00,00,000 and 20,00,00,000
respectively.
8. Revenue from outside India is 6,20,00,00,000 and segment asset outside India
1,00,00,00,000.
Based on the above information, comment how X Ltd. would disclose information about
reportable segment revenue, profit or loss, assets and liabilities for financial year
20X1-20X2.
3. An entity uses the weighted average cost formula to assign costs to inventories and cost of
goods sold for financial reporting purposes, but the reports provided to the chief operating
decision maker use the First-In, First-Out (FIFO) method for evaluating the performance of
segment operations.
State the cost formula to be used for Ind AS 108 disclosure purposes.
4. ABC Limited has 5 operating segments namely A, B, C, D and E. The profit / loss of
respective segments for the year ended 31 st March, 20X1 are as follows:
Segment Profit/(Loss)
( in crore)
A 780
B 1,500
C (2,300)
D (4,500)
E 6,000
Total 1,480

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.131

Based on the quantitative thresholds, state which of the above segments A to E would be
considered as reportable segments for the year ending 31 st March, 20X1.
Answers
1. Threshold amount is 10,00,000 ( 1,00,00,000 × 10%).
Segment A exceeds the quantitative threshold ( 30,00,000 > 10,00,000) and hence
reportable segment.
Segment D exceeds the quantitative threshold ( 54,00,000 > 10,00,000) and hence
reportable segment.
Segment B & C do not meet the quantitative threshold amount and may not be classified as
reportable segment.
However, the total external revenue generated by these two segments A & D represent
only 70% [( 35,00,000 / 50,00,000) x 100] of the entity’s total external revenue. If the total
external revenue reported by operating segments constitutes less than 75% of the entity
total revenue, additional operating segments should be identified as reportable segments
until at least 75% of the revenue is included in reportable segments.
In case of X Ltd., it is given that Segment C is a new business unit and management
expect this segment to make a significant contribution to external revenue in coming years.
In accordance with the requirement of Ind AS 108, X Ltd. designates this start-up segment
C as a reportable segment, making the total external revenue attributable to reportable
segments 87% [( 43,50,000/ 50,00,000) x 100] of total entity revenues.
In this situation, Segments A, C and D will be reportable segments and Segment B will be
shown as other segment.
Alternatively, segment B can be considered as a reportable segment as well as it meets
the definition of operating segment. If Segment B is considered as reportable segment:
External revenue reported: 30,00,000 + 6,50,000 + 5,00,000 = 41,50,000
% of Total External Revenue = 41,50,000 / 50,00,000 = 83%
Accordingly, Segments A, B and D will be reportable segments and Segment C will be
shown as other segment.
2. Segment information
(A) Information about operating segment
(1) the company’s operating segments comprise:
Coatings: consisting of decorative, automotive, industrial paints and related activities.
Others: consisting of chemicals, polymers and related activities.

© The Institute of Chartered Accountants of India

 10.132 2. a
FINANCIAL REPORTING
132 v
v
(2) Segment revenues, results and other information. ( in Lakhs)

Revenue Coating Others Total

1. External Revenue (gross) 2,00,000 70,000 2,70,000
GST (5,000) (3,000) (8,000)
Total Revenue (net) 1,95,000 67,000 2,62,000
Other Operating Income 40,000 15,000 55,000
Total Revenue 2,35,000 82,000 3,17,000
2. Results
Segment results 10,000 4,000 14,000
Unallocated income (net of unallocated 3,000
expenses)
Profit from operation before interest, 17,000
taxation and exceptional items
Interest and bank charges (2,000)
Profit before exceptional items 15,000
Exceptional items Nil
Profit before taxation 15,000
Income Taxes
-Current taxes (1,950)
-Deferred taxes (50)
Profit after taxation 13,000

3. Other Information
(a) Assets
Segment Assets 50,000 30,000 80,000
Investments 10,000
Unallocated assets 10,000
Total Assets 1,00,000
(b) Liabilities and Shareholder’s funds
Segment liabilities 30,000 10,000 40,000
Unallocated liabilities 20,000
Share capital 10,000

© The Institute of Chartered Accountants of India

 INDIAN ACCOUNTING STANDARD 108 10.133

Reserves and surplus 30,000

Total liabilities and shareholder’s funds 1,00,000
(c) Others
Capital Expenditure (5,000) (2,000) (7,000)
Depreciation (1,000) (300) (1,300)
Geographical Information ( in lakhs)
India Outside Total
( ) India ( )
( )
Revenue 2,55,000 62,000 3,17,000
Segment assets 90,000 10,000 1,00,000
Capital expenditure 7,000 7,000

Notes:
(i) The operating segments have been identified in line with the Ind AS 108, taking into
account the nature of product, organisation structure, economic environment and
internal reporting system.
(ii) Segment revenue, results, assets and liabilities include the respective amounts
identifiable to each of the segments. Unallocable assets include unallocable non-
current assets and other current assets. Unallocable liabilities include unallocable
current liabilities and net deferred tax liability.
(iii) Corresponding figures for previous year have not been provided. However, in a
practical scenario the corresponding figures would need to be given.
3. The entity should use First-in-first-out (FIFO) method for its Ind AS 108 disclosures, even
though it uses the weighted average cost formula for measuring inventories for inclusion in
its financial statements. Where chief operating decision maker uses only one measure of
segment asset, same measure should be used to report segment information. Accordingly,
in the given case, the method used in preparing the financial information for the chief
operating decision maker should be used for reporting under Ind AS 108.
However, reconciliation between the segment results and results as per financial
statements needs to be given by the entity in its segment report.
4. With regard to quantitative thresholds to determine reportable segment relevant in context
of instant case, paragraph 13(b) of Ind AS 108 may be noted which provides as follows:
“The absolute amount of its reported profit or loss is 10 per cent or more of the greater, in
absolute amount, of (i) the combined reported profit of all operating segments that did not

© The Institute of Chartered Accountants of India

 10.134 2. a
FINANCIAL REPORTING
134 v
v
report a loss and (ii) the combined reported loss of all operating segments that reported a
loss.”
In compliance with Ind AS 108, the segment profit/loss of respective segment will be
compared with the greater of the following:
(i) All segments in profit, i.e., A, B and E – Total profit 8,280 crores.
(ii) All segments in loss, i.e., C and D – Total loss 6,800 crores.
Greater of the above – 8,280 crores.
Based on the above, reportable segments will be determined as follows:
Segment Profit/(Loss) As absolute % of Reportable
( in crore) 8,280 crore segment
A 780 9% No
B 1,500 18% Yes
C (2,300) 28% Yes
D (4,500) 54% Yes
E 6,000 72% Yes
Total 1,480

Hence B, C, D, E are reportable segments.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
© The Institute of Chartered Accountants of India